‘Optimal milk prices during peak months crucial when market conditions allow’

It is crucial that farmers are allowed to optimise their milk price over peak production months, when the market returns justify it, Sean O’Leary of the IFA (Irish Farmers’ Association) said.

O’Leary, who is the IFA’s National Dairy Committee Chairman, was speaking in light of the results from the latest Global Dairy Trade (GDT) auction; the overall price index decreased by 0.8%.

“I see no reason why Irish co-ops would be cautious and conservative on milk prices when the short to medium-term trend is clearly strong,” he said.

Price increases for butterfat and skimmed milk powder (SMP) at yesterday’s GDT auction underpin the sustainability of current buoyant dairy prices, O’Leary added.

The slight price decrease at the most recent GDT event reflected the poor performance of whole milk powder (WMP), which dropped by 3.3%. Meanwhile, butterfat and SMP prices continued their strong recovery.

With peak production levels just past in Europe and the US, and the new season in New Zealand still a few months off its own peak, it is hard to argue against the full justification for significant milk price increases for June milk, O’Leary said.

The prices reached at [yesterday’s] GDT event for SMP and butter are the equivalent to an Irish milk price, after processing costs of 5c/L [are deducted], of 36.9 c/L including VAT.

“The confidence in the medium to longer-term market trends was clearly expressed by Fonterra in their increase to the opening 2017/18 milk price forecast to NZ$6.50/kg MS (milk solids),” O’Leary said.

This is the equivalent to an Irish milk price of around 31.6c/L including VAT, he added.

“Closer to home, butter spot quotes in Germany, France and the Netherlands have reached €5,700/t in the last week, while SMP now exceeds €2,000/t.

“EU average returns, as reported for June 11 by the EU Milk Market Observatory, are slightly below that – but trending in the same direction – with butter prices up 11% to €4,990/t in the last month and SMP up 8% to €1,940/t,” he said.

Those figures would indicate a milk price equivalent of 36.4c/L including VAT, after processing costs of 5c/L were deducted, the IFA’s National Dairy Committee Chairman added.

Irish co-ops should have confidence that global dairy market trends justify meaningful milk price increases for milk produced in June, O’Leary concluded.

The majority of processors decided to up their May base milk prices by 1c/L; this was despite calls from the IFA for a 2c/L increase.